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BUSINESS LAW NOTES

INDIAN CONTRACT ACT 1872


ACCEPTANCE A. RULES 1. Acceptance must be communicated to the person who has made an offer.
Mental acceptance, failure to answer or silence on part of the offeree is not acceptance, as it is not communicated. However for a eneral offer, no acceptance is necessar!, if it is made b! compl!in with the terms of the offer."#arbolic Smo$e %all #ase& E ' A offers to % to sell his house in a prime localit! for Rs. () la$hs. % had made up his mind to purchase it, but does not sa! an!thin to A. *here is no acceptance as it is not communicated.

Case: Felthouse v/s Bindley


Facts- +elthouse wrote a letter to his nephew, ,- want to bu! !our horse. -f - hear no more from !ou, - shall assume the horse to be mine.. /ephew informed %indle!, an auctioneer, to $eep the horse out of sale. %indle! b! mista$e sold the horse to somebod!. 0hen +elthouse came to $now this, he brou ht an action a ainst %indle!. eld- An uncommunicated acceptance is not an acceptance at all. +urther acceptance cannot be waived b! the proposer.

(. Acceptance must be communicated by the person to whom an offer has been made.
Acceptance shall be made onl! b! the person to whom the offer was made. However, in case of eneral offer, acceptance can be inferred from an! member of the public, b! their adherence to the terms of the offer. Case: !o"ell v/s Lee Facts- 1owell was a candidate for headmastership of a school. *he school mana in committee passed the resolution appointin Mr. 1owell. Lee, who was one of the members of the mana in committee, happened to be a friend of Mr. 1owell. He informed 1owell of his appointment. However, due to some e2ternal pressures, the resolution was withdrawn. eld- Lee had informed 1owell in his friendl! capacit! and the communication was not on behalf of the school authorities.

3. Acceptance must be communicated in the prescribed manner onl! else it is not bindin on the proposer.
-f the offer prescribes a mode of acceptance, then it shall be made in that mode onl!. -f acceptance is communicated in some other manner and the offered remains silent, he is deemed to have consented to the acceptance, even if it not in the prescribed manner. 0hen no mode is prescribed, it shall be made in some usual and reasonable manner. E. . ' A sends a letter to % offerin to sell his old carria e and as$s % to repl! b! tele ram. % shall repl! onl! b! tele ram and not otherwise. Even if % accepts otherwise, A can insist on receivin a tele ram. -f A does not so insist within a reasonable time, he is deemed to have assented to %4s acceptance in such mode as had been made b! %.

5. Acceptance must be absolute and un6ualified.


-f the person to whom an offer is made accepts the same sub7ect to some conditions, it is called 6ualified acceptance and is not bindin on the person who ma$es the proposal. -n other words, a valid acceptance can be onl! for the e2act terms of the offer as proposed b! the offered. Acceptance with a variation constitutes a counter offer and is not a valid acceptance. -llustrations 1& A prospective bu!er offers to bu! an article from a seller at a certain price to be paid after three months. Seller accepts the offer provided cash is immediatel! paid. Such an acceptance is not bindin on the offerer. (& 8 offers to sell his cow to 9. 9 replies that he would bu! it onl! if he ave the calf alon with it. *his is not a valid acceptance as it is 6ualified.

). An offer once re7ected is dead and cannot be accepted unless it is revived.


-llustration +ashion street illustration of counter offers.

:. Acceptance should emanate from an offer.


Acceptance should onl! be in response to an offer i.e acceptance cannot precede an offer. E ' ; cannot sa! that he accepts to bu! <4s house without an offer from <.

ACCE!TANCE T #OU$

!OST

-n case of acceptance throu h post, the communication of acceptance is complete, a& as against the proposer, when the letter of acceptance is put in the course of transmission to him= and b& as against the acceptor, when it comes to the $nowled e of the proposer.
E. . ' H, in response to >4s offer dated April 1, (?1(, communicates his acceptance on April ), (?1( b! post which reached > on April @, (?1(. As re ards >, communication of acceptance is complete when the letter is posted b! H i.e. April ), (?1( and as re ards H, acceptance is said to be communicated when the letter reaches > i.e. April @, (?1(.

/oteA' *he proposer becomes bound onl! when a properl! addressed and ade6uatel! stamped letter is posted. REBC#A*-C/ C+ A 1RC1CSAL ' Section ) Revocation means Dwithdrawin D or Dta$in bac$.D A proposal ma! be revo$ed at an! time before the communication of its acceptance is complete as a ainst the proposer, but not afterwards. 0hen a proposal is revo$ed, offer comes to an end. Section : A proposal can be revo$ed in an! of the followin four wa!s' 1. %! communication of notice of revocation b! the proposer to the other part!. (. %! lapse of time prescribed in such proposal for its acceptance. -f no time is so prescribed, b! the lapse of a reasonable time. 0hat is reasonable time will depend upon the facts and circumstances of each case. 3. %! failure of the acceptor to fulfill a condition precedent to acceptance. 5. %! death or insanit! of the proposer. REBC#A*-C/ C+ A##E1*A/#E ' Section )

An acceptance ma! be revo$ed at an! time before the communication of acceptance is complete as a ainst the acceptor, but not afterwards. #CMMU/-#A*-C/ C+ REBC#A*-C/ Section 5 #ommunication of revocation is complete, i& ii& as against the person who makes it, when it is put in the course of transmission to the person to whom it is made so as to be out of the power of the person who ma$es it= as against the person to whom it is made , when it comes to his $nowled e.

-llustrations' 1& A revo$es his proposal b! tele ram. *he revocation is complete as a ainst A when the tele ram is dispatched. -t is complete as a ainst B, when B receives it. (& +acts ' M a reed on Monda! to sell his propert! to / b! a written a reement which stated that ,this offer to sta! open till Saturda! 1? a.m.. -n the meantime on 0ednesda!, M enters into a contract to sell the propert! to 1. /, who was sittin in the ne2t room at that time, hears about the deal between M and 1. Cn +rida!, / accepts the offer and delivers to M the letter of acceptance. -s /4s acceptance validE Held F ' Acceptance is made before the revocation of the offer b! M and well within the specified time limit set b! M in his letter of offer. ' Cverhearin b! / does not amount to valid revocation b! M. ' Hence, /4s acceptance is perfectl! valid. ' *he treatment would have been different if, before acceptance b! /, M had formall! communicated his revocation to him.